Loan Modifications are a hot topic these days. Unemployment rates are at an all time high in 30 years, Housing values are decreasing and making the monthly mortgage payment is difficult - and not possible for some. A Loan Modification can be done by any home owner, but a lot of knowledge and tenacity is necessary - and typically - the duration needed is 6 months. A modification with FULL analysis of the provided documents takes typically 6 months after the initial application: If you get a modification offer any earlier; chances are that it's not the best deal available!
Here are some instances where a loan modification might be a perfect fit. Typically, it takes at least a couple of these items in order to be a good candidate: The mortgage payment is in arrears (missed mortgage payments), a reduction in income, increase in cost of living expenses, adjustable rate or interest only mortgage rates, or an increase in taxes and insurance related to the home, or the principle well exceeds the homes current value - "upside down".
Now, it time to get organized if you're going to take on this adventure yourself! There will be lots of paperwork that you should have on hand - and get ready to add some additional paperwork that the Lender DOESN'T typically asks for. The Lender will require a copy of your mortgage statement, last 2 paystubs, two years tax returns, one month's statements of all checking and savings, a financial affidavit and a monthly expense sheet. Here is an important note! A good document to add into your submission is a financial affidavit that has your CURRENT mortgage payment and monthly expenses - side by side with a PROPOSED mortgage payment and monthly expenses. Obviously, the latter shows how you can afford the payment, whereas the current mortgage payment might place you over budget a couple of hundred dollars a month; hence the missed mortgage payments!
In addition, the Lender will sometimes require a copy of the insurance policy and/or tax roll, to help "reconfirm" the property value! Do some homework and add the public records of your property tax records! Often, public tax records will also have a "tab" that you allows you to click on to see the "comparables" for properties in your area. This will typically give a real life value to your home - at its CURRENT value. Public records can typically be accessed via the property appraiser's office for your county. Don't Forget! If the value is down - then do a loan proposal for the LOWER, adjusted mortgage at the current value; "a principle reduction".
One more thing - typically, Lending guidelines for new loans and Loan Modifications have a DTI (debt to income ratio) of no more than 38%. So, when doing the loan proposals, make sure to determine your DTI. The easy way to do this? Add your mortgage payment and taxes and insurance (monthly - and only if it is NOT in your monthly mortgage payment) all minimum payments required for any debt that would show up on your credit report. Car Payments, minimum credit card payments, students loan etc etc. Then take that number and divide it by your monthly gross income. Here is an example: Monthly mortgage payment and aforementioned financial debts = $2,345 a month. Monthly gross income is $5,000. The DTI would equal 46.9%. Too high! You want the proposal to fall between 31% and 38% when doing your Loan Modification proposals. So if you decide to take on the Loan Modification battle, doing this paperwork would be a good start! Not feeling so brave at this point? Then, there are reputable support services available! When searching for a company that does this type of work - do your homework! Avoid companies paying for services BEFORE any work has occurred - and make sure YOU own your paperwork throughout the entire process. So, as the Lender communicates via mail - the paperwork should go to YOUR home, not the processor. This alleviates surprises and keeps the support system you have chosen on their toes!
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